(The following statement was released by the rating agency)
-- On Nov. 30, 2012, Spain-based Banco Popular Espanol S.A.
(Popular) announced the completion of its offer to repurchase, among other
securities, its outstanding preferred stock and nondeferrable subordinated debt
-- The losses we anticipate that Popular will report in 2012--as a result
of Spain's new provisioning regulation--would trigger mandatory nonpayment on
all outstanding preferred stock.
-- We are raising our issue ratings on the remaining preferred stock to
'CCC-' from 'C' and on the remaining nondeferrable subordinated debt to 'B-'
from 'D'. We are lowering our issue ratings on the preferred stock excluded
from the tender offer to 'CCC-' from 'CCC'.
-- Today's action doesn't affect the counterparty credit ratings or any
other issue ratings on Popular.
Dec 19 - Standard & Poor's Ratings Services said today that it has raised to
'CCC-' from 'C' its issue ratings on the remaining preferred stock of
Spain-based Banco Popular Espanol S.A. (Popular) following the closing of
Popular's tender offer. We have also raised to 'B-' from 'D' our issue rating on
Popular's remaining nondeferrable subordinated debt.
At the same time, we lowered our issue ratings on the preferred stock that was
excluded from the tender offer to 'CCC-' from 'CCC'.
The rating action follows the bank's announcement on Dec. 12, 2012, that it
had completed its Nov. 30, 2012, tender offer launched to repurchase, among
other securities, its outstanding preferred stock and nondeferrable
subordinated debt securities.
In our media release on Dec. 6, 2012, we said that we considered Popular's
tender offer a "distressed exchange" under our criteria. According to our
criteria, we lowered our issue ratings to 'C' on the tendered preferred stock
and to 'D' on the tendered nondeferrable subordinated debt (see "Banco Popular
Espanol's Hybrid And Subordinated Debt Lowered To 'C' And 'D' On Distressed
Exchange," Dec. 6, 2012).
Our 'CCC-' issue rating on Popular's preferred stock reflects what we see as a
high probability of deferral or nonpayment of the dividends in the coming
quarters. This is because we anticipate that Popular will report losses in
2012 as a result of Spain's new provisioning regulation. This would trigger
mandatory nonpayment on all preferred stock because of the narrow earnings
test currently included in the terms and conditions of the hybrid instruments
for Spanish banks. In Spain, the payment of the preferred stock dividends for
the current fiscal year is usually conditioned on the existence of
distributable profits in the previous year. Distributable profits are usually
defined as the lower of net profits of either the bank or the consolidated
group as reported to the Bank of Spain. We understand that the Bank of Spain
and the Comision Nacional del Mercado de Valores could still allow the
dividend payments to be made if Popular reported a loss, but we are unsure
whether they would exercise this power.
In accordance with our criteria, the 'B-' issue rating on the nondeferrable
subordinated debt is two notches below Popular's stand-alone credit profile,
which we assess at 'b+'.
RELATED CRITERIA AND RESEARCH
-- Banco Popular Espanol's Hybrid And Subordinated Debt Lowered To 'C'
And 'D' On Distressed Exchange , Dec. 6, 2012
-- Criteria For Assigning 'CCC+', 'CCC', 'CCC-', And 'CC' Ratings, Oct.
-- Credit FAQ: Applying The Bank Hybrid Capital Criteria To Specific
Instruments, Dec. 20, 2011
-- Bank Hybrid Capital Methodology And Assumptions, Nov. 1, 2011
-- Timeliness of Payments: Grace Periods, Guarantees, And Use Of 'D' And
'SD' Ratings, Dec. 23, 2010
-- Rating Implications Of Exchange Offers And Similar Restructurings,
Update, May 12, 2009
Popular Capital S.A.
Preferred Stock* CCC- CCC
Popular Preference (Cayman) Ltd.
Preference Stock* CCC- CCC
Banco Popular Espanol S.A.
Subordinated B- D
BPE Financiaciones S.A.
Subordinated* B- D
Popular Capital S.A.
Preferred Stock* CCC- C
*Guaranteed by Banco Popular Espanol S.A.
(Caryn Trokie, New York Ratings Unit)